Many franchisors’ fiscal year ended on December 31st. The FTC gives a franchisor 120 days to update its franchise disclosure document (FDD) but you should be gathering the information needed to update your FDD and file your state renewals (if applicable) NOW! Below are some quick tips franchisors should follow to ensure they meet the deadlines:
- Keep in contact with your accountants or finance division and remind them that the audited financials must be completed before April 30th. Many delays in updating an FDD will be the result of auditors not having adequate time to prepare the financials. For franchisors filing state registration renewals the deadline for the audit may be sooner. Some states require that renewal registration applications be filed days or weeks in advance of the 120 day deadline. If you are filing state renewal registrations make sure you get your Consents of Accountant forms returned with the financials.
- Begin compiling the additional information needed to update your FDD in an organized and complete manner. This includes changes to executive personnel, disclosure of new litigation, updated financial performance representations under Item 19, and current franchise sales data for the 2013 year. If your outside or in-house counsel does not provide you with a renewal questionnaire or list of needed information to easily compile this data then request they do so.
- Make sure that the outside or in-house counsel responsible for overseeing the final updates or filing state renewals are provided with accurate draft documents and other information with ample time to review, revise, comment, and finalize. Seasoned franchise counsel should have a streamlined system in place for handling updates and renewals. The starting place to this process, however, is getting accurate information from the franchisor.
Failing to update or file renewal registrations on time can impede a franchisor’s ability to offer and sell. Therefore, it is important to get a head start on the process to give all parties involved adequate lead time.